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2. Types of financial markets
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Financial markets across economies involve various kinds of participants and trade various types of
and securities. It is important to understand the kinds of markets in which financial transactions take
place.
You are preparing to take an exam in your finance class, and you've been making flash cards on different
markets and transactions. Indicate the markets in which each of the following transactions will be
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Description of Transaction
Type of Market
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Sonia takes a mortgage loan from a bank to purchase property.
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Description of Transaction
An investor buys \$10,000 worth of gold at a certain price today.
Description of Transaction
Abbey allocates 80% of her portfolio for investments in short-
term US Treasury bills.
Type of Market
A
Type of Market
Description of Transaction
Google filed its initial public offering worth \$2.7 billion in 2004.
Source: CNNmoney.com, Apr. 30, 2004.
Type of Market
A corn processor in Nebraska has decided to purchase a futures contract for corn. The contract will
increase in value if the price of corn rises, thereby offsetting the processors' increased costs/decrease
net income. In this example, the corn processor is
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